Brief 5 of 9 - November 2000 - Returns to Public Investment: Evidence from India and China

Brief 6 of 9 - November 2000 - Development Strategies for Semiarid South Asia

Brief 7 of 9 - November 2000 - Development Strategies for the East African Highlands

Brief 8 of 9 - November 2000 - Development Strategies for West Africa

Brief 9 of 9 - November 2000 - The Role of Agricultural Science

Brief 6 of 9 - November 2000 - Development Strategies for Semiarid South Asia

John Kerr

John Kerr is assistant professor in the
Department of Resource Development at Michigan State University,
U.S.A.

Home to nearly 300 million people, the South Asian semi-arid
tropics cover mainly southern interior areas of India and small parts of
Pakistan and Sri Lanka. Poverty levels are high and literacy rates low. With
productivity greatly limited by low, variable rainfall, lack of irrigation, and
poor soils, the semiarid tropics contrast sharply with the irrigated areas of
the Indo-Gangetic plain, which was the cradle of the Green Revolution and
remains the region's breadbasket. Nonetheless, infrastructure and access to
markets and services are relatively good compared with Sub-Saharan Africa, in
part because South Asia's high population density reduces the per capita cost of
infrastructure. Since nearly all of the South Asian semiarid tropics lie in
India, this brief focuses on that country.

Raising agricultural productivity is essential to stimulating
economic development, reducing poverty, and protecting natural resources in the
Indian semiarid tropics. Three-quarters of the population lives in rural areas,
and their livelihoods depend on agriculture. Moreover, agricultural growth can
create purchasing power among rural people that generates demand for locally
supplied goods and services, helping create jobs off the farm. Raising
agricultural productivity also complements natural resource conservation because
it requires better management of soil, water, and nutrients.

AGRICULTURAL PRODUCTIVITY

Rainfed agricultural growth is nearly stagnant in the semiarid
tropics, and Green Revolution technologies have had little impact. Farmers
pursue complex, multifaceted strategies for earning their livelihoods, with a
premium on reducing risk. They are keenly aware that new agricultural
technologies and natural resource management practices usually incur opportunity
costs by competing with one or more of the many components of the farm household
economy. Where feasible, farmers in the semiarid tropics have made large
investments in irrigation wells to convert small dryland areas into highly
productive irrigated plots that now provide a significant share of household
food, fodder, and cash needs.

Infrastructure and access to markets also influence rainfed
agricultural development. Access to institutional credit sources is limited, and
marketing restrictions reduce the profitability of some crops. On the other
hand, government policies have made oilseeds more profitable, greatly benefiting
farmers in the semi-arid tropics. Infrastructure investments have generated
marketing opportunities for these crops and also for milk, whose production has
flourished under village-based marketing cooperatives.

NATURAL RESOURCE DEGRADATION

Natural resources in the Indian semiarid tropics are subject to
various forms of degradation. Soil nutrient deficits are wide spread on rainfed
land. Farmers have abandoned traditional crop rotation systems because of land
scarcity; they also apply less organic matter, which has high value as fodder
and fuel. Irrigated plots received most of the available manure and most
fertilizer.

Soil erosion is also widespread. Soil conservation programs have
had limited impact, mainly because recommended practices were incompatible with
existing farming systems. Farmers have indigenous methods to control erosion,
but they often fail to adopt these methods because they are not profitable and
because of factors such as short-term tenancy contracts and credit market
restrictions. Investment is higher on irrigated plots because water management
practices also have soil conservation benefits.

Water may be the key to sustainable intensification of
agriculture in the semiarid tropics, because farmers manage their soil better on
irrigated plots. However, water sources are scarce and subject to degradation.
For example, traditional irrigation tanks, or ponds that capture runoff from
rainfall, have deteriorated as traditional community management systems have
nearly disappeared. Well irrigation skyrocketed after 1980 because of
technological improvements, underpriced electricity that makes the marginal cost
of irrigation almost zero, and the fact that wells (unlike tanks) can be
controlled individually. Underpriced power and open access to groundwater have
encouraged overpumping, putting pressure on the semiarid tropics' unproductive,
hard rock aquifers. The decline of tanks, meanwhile, reduces an important source
of groundwater recharge.

Pastures and forests are extremely unproductive. Analysis
suggests that more than 80 percent of India's uncultivated lands produce 20
percent or less of their biological potential. Village pasture and forest lands
are largely government owned. Postindependence institutional reforms removed
powerful landlords who had acted as gatekeepers to common lands. These reforms
improved equity but failed to install an effective alternative management
system. Common lands declined in area, productivity, and employment generation,
and these changes hit poor people hardest since they depended most on these
lands.

ELEMENTS OF A DEVELOPMENT STRATEGY

Four issues are especially significant for development of
less-favored lands in the semiarid tropics: technology development, legal and
administrative reforms for natural resource management, infrastructure
investment, and risk management.

Technology Development

Improved agricultural technology, particularly more productive
cultivars, is an important source of productivity growth in rainfed areas.
Successfully introducing better agricultural technology will require that
agricultural research and extension systems increase their focus on clients and
appreciate the complex and often location-specific factors that determine
technology adoption. For example, plant breeders need to pay more attention to
fodder value, grain quality, and drought resistance. Fertilizer recommendations
need to be tailored to location-specific agroclimatic conditions and rainfall
fluctuations. More attention needs to be paid to improving indigenous soil and
water management systems.

Biotechnology may be a source of raised productivity, helping
stabilize yields through drought tolerance and pest resistance. Government
investment will be needed to apply biotechnology to less-favored areas that the
private sector will likely bypass.

Institutional Reforms in Natural Resource
Management

Land and water resources could be better managed by reforming
outdated laws and bureaucratic procedures.

Uneven access to land can prevent the most efficient allocation
of land and complementary inputs such as labor, while insecure tenure inhibits
investment in land improvement and conservation. Land access is highly
correlated with poverty; households with even the smallest holdings face a much
lower risk of absolute poverty than landless households. Opening up lease
markets would provide secure tenure to those poor people who can access
agricultural land only through tenancy. Similarly, women's legal right to own
land needs to be translated into practice to improve their socioeconomic
security and help them gain access to institutional credit.

Efficient groundwater management requires developing
well-specified, enforceable property rights. This will be extremely challenging,
and small-scale experimentation must precede major legal changes. Needed
electricity price reforms are more likely to be forthcoming because the current
pricing system drains state government budgets.

Watershed management projects aim to harmonize the management of
soil, water, and natural vegetation. Major government investments have had
limited impact, in part because technocratic approaches have failed to address
the fact that watershed development distributes benefits unevenly between
upstream and downstream areas yet often requires universal cooperation.
Accordingly, social institutions to encourage cooperation and share net benefits
are critical to successful watershed development. Some participatory projects,
usually managed by nongovernmental organizations (NGOs), have introduced more
farmer involvement and more attention to social organization. Government
projects have officially adopted the same approaches, but they need to enable
staff to work in a more decentralized, participatory way. Also, they should test
innovative pilot projects before scaling up to a nationwide level. Some NGOs
have purposely invested primarily in villages where people demonstrate a greater
propensity for collective action or where there is less need for collective
action. This is a sensible strategy for cost-effective use of limited watershed
project budgets.

Improving Infrastructure and Marketing
Institutions

Past public investments in infrastructure have contributed to
agricultural growth and poverty alleviation in both rainfed and irrigated areas.
Investments in new roads support agricultural growth and poverty reduction by
raising net returns to agriculture and facilitating economic diversification.
Returns to all types of government investments are particularly high in
less-favored areas, in part because these areas have been relatively neglected
in the past. Additional government investment in less-favored areas raises
production by more, and brings more people above the poverty line, than does
additional investment in irrigated areas.

Operation Flood provides an excellent example of the power of
infrastructure and marketing. Launched in 1970, it created multitier milk
production and marketing cooperatives throughout India that have succeeded in
moving milk from rural producers to Urban consumers via collection and
processing centers, thus improving food availability and raising rural incomes.
India's dense population helped make this approach cost-effective. Even in
villages with no motorable road, bicycles move milk quickly to a nearby dairy.
Continued expansion of dairy production in the semiarid tropics will require
efficient water management to support green fodder production.

Many agricultural commodities remain subject to various
marketing restrictions. Marketing costs could be reduced through reforms such as
allowing free interstate trade in rice, abolishing stocking limits on private
traders, introducing a futures market to help reduce marketing costs, and
removing cotton export quotas.

Finally, investment opportunities vary with both agroclimatic
and infrastructural conditions within the semiarid tropics. Just as successful
dairy development has required at least modest access to irrigation, soybeans
and groundnuts both flourished where agroclimatic conditions were particularly
suitable. Another factor that distinguishes the semiarid tropics is distance
from a large town or city. More remote areas need more employment and may be
attractive for labor-intensive industrial development. Villages closer to
cities, on the other hand, often specialize in perishables such as cut flowers
and fresh produce, and similar opportunities may remain untapped.

Risk Management

Traditional risk management strategies have helped people manage
drought risk, but they are costly and ineffective in the event of widespread,
major droughts. Government employment schemes help landless people cope with
drought, and crop insurance appears to have a favorable impact, but at an
extremely high cost to the government. For those who do not grow insurable
crops, another form of insurance is needed. It must be affordable; be accessible
to all, including the poor; compensate for total income losses; be practical to
implement; and be able to be provided by the private sector. Area-based rainfall
insurance offers a promising new alternative that in principle can meet all
these requirements and could be tested on a limited scale. The government could
also invest in early warning drought forecasting to help farmers
plan.